3.1 This section of the MoU sets out the details of the parties entering in to the MoU. Broadly speaking, there are likely to be two parties, the developer (being the entity taking forward the construction and development of the particular windfarm project) and the community that is represented for the purposes of the MOU by a community organisation that is broadly representative of the community.
3.2 At the point of entering into the MoU, it may be that arrangements for the receipt and distribution of community benefit still have to be decided upon. At this stage, the geographical area where the benefits are to be provided would be named, and reference made to options for the receipt and distribution of community benefit including via a community body already established, some other entity established for this specific purpose, or a third party providing specialist support in relation to community benefit arrangements. It is therefore possible that the Community Signatory named in the MoU may not be the same as the entity that enters into the formal contract with the developer at a later stage.
3.3 This section simply records the intentions of the parties to the MoU and the purpose of the MoU. In this instance it sets out the following:
3.3.1 the details of the developer and the project, with details being required to be inputted as regards the development;
3.2.2 the details of the community (please see comments at paragraph 2 above) and the role that the Community Signatory or other incorporated entity to be established, or charitable third party entity, specialist in providing community benefit administration support, will take as regards the community benefit arrangements; and
3.3.3 the intention of the parties to set out a set of principles which will go on to underpin a formal binding agreement to be entered into between the Developer and the Community Signatory or other incorporated entity to be established, or charitable third party entity, specialist in providing community benefit administration support, once a financial investment decision (FID) (this is the point at which the developer, and, if applicable, their funders, commit to the investment) has been reached.
3.4 This clause sets out the detail of the proposed community benefit arrangements, namely in terms of the financial offer being made by the Developer to the Community (ie a value being attributed to MW installed, this figure may vary depending on the number of years the windfarm has been operational).
3.5 The detail of this clause may vary from project to project, depending on the nature of the offer being made to the community. The detail incorporated into the template MoU at this section reflects the principles outlined in the Scottish Government’s Good Practice Principles (including that the financial contributions will be index-linked).
3.6 This clause sets out detail as to the ways in which the community shall be entitled to make use of the community benefit funds. In general terms, it is expected that the community benefit funds will require to be utilised towards charitable purposes.
3.7 Other key details can be added to this clause when they have been agreed. Generally speaking an the MoU stage, there may not be extensive detail available and more can be agreed and confirmed within a formal community benefit agreement as matters progress.
3.8 It may be that in some instances, certain developers will seek to impose other conditions as to how community benefit funds are to be utilised or will seek to ensure that the community benefits are not utilised towards certain elements that are seen as contrary to their own policies. However, the developer should acknowledge that the community body will be a charity and as such will only be able to use the funds for charitable purposes. It may be that in certain instances, agreement is reached that a certain proportion of funding be used in a particular way, for example, that [ l] % be utilised towards a particular project or in a particular geographical area. Any such details, whether at the request of the developer or the community, should be included within this clause of the MoU. Ideally the developer should avoid imposing restrictions over and above that and the distribution of the funds should be community led.
3.9 If the area of benefit has been agreed at this stage it can be stated here. However, since the MoU will be being entered into at an early stage relative to the project, the area of benefit may not be agreed. In such instances, where possible, a statement should be included setting out a process by which the area of benefit will be agreed (how, when and by who).
3.10 The MoU provides that in the event that the developer in the future, either sells or otherwise transfers (perhaps to another entity within its own group) its interest in the development, that it shall seek to ensure that the other party will enter into a similar arrangement as the MoU with the community.
3.11 As noted at paragraphs 11 to 2.13, the MoU is not intended to create legally binding obligations and so this clause is indicative of an intention of the developer rather than creating a legally binding obligation in such instances. It is, in fact, problematic even in the context of a legally binding agreement to seek to bind developers in such instances owing the personal nature of the obligations to the company that is a party to the agreement.
3.12 This clause has been included within the template MoU as a means of demonstrating the commitment of the developer to the overall project and reflects an intention that the developer would seek to ensure that a similar arrangement be entered into with any third party that subsequently takes over its interest in the windfarm.
3.13 Reference is made within the MoU to the possibility of shared ownership and a commitment from the developer to consider options relating to shared ownership in the future.
3.14 The inclusion of reference to shared ownership within the MoU reflects the Scottish Government’s ambition for increased levels of community ownership where all stakeholders stand to benefit from greater partnership working and other additional benefits, including creating a lasting legacy, building community capacity, and strengthening corporate social responsibility.
3.15 The hope is that by including this reference to shared ownership in general terms within the MoU, this will highlight at an early stage in the relationship between the developer and the community, the possibility of an agreement beyond community benefits and towards shared ownership.
3.16 There are a number of factors to consider in relation to shared ownership, including the structure and terms of the arrangement and the regulatory requirements. It is recommended that legal and regulatory advice be sought by the developer and the community before any preliminary discussions on shared ownership are held to ensure regulatory compliance with all applicable laws including the Financial Services and Markets Act 2000, all secondary legislation enacted thereunder and the FCA rules.
3.17 As noted elsewhere, an “MoU” is not intended to be a legal binding agreement, creating legally binding obligations or rights on any party. Instead an MoU is intended to reflect the intentions of the parties to that MoU and is a pre-cursor to the entry into of a formal legally binding agreement.
3.18 In this instance, the MoU is intended to capture, at an early stage, the basis of a future agreement between the developer and the community, the likelihood being that this formal community benefit agreement would be entered into once the project of at a more advanced stage.
3.19 While, in general terms, the MoU is not intended to create legally binding obligations, the template MoU seeks to provide that certain elements of it will be taken to have legal force. Those elements that are deemed to be legally binding are included at paragraphs [5.2.1 – 5.2.5] and are:
3.19.1 details around the term of the MoU and noting that it comes in to effect on the date it is signed by the final party to the MoU and will continue in force until such time as a formal community benefit agreement is entered into;
3.19.2 that no party to the MoU will have a claim against any other party to the MoU in the event that no formal community benefit agreement is entered into;
3.19.3 that no party to the MoU is entitled to make commitments or statements on behalf of any other party to the MoU (ie that no party to the MoU is entitled to speak on behalf of the other party nor make any commitments on behalf of the other), nor are they entitled to incur any third party costs on behalf of the other party to the MoU;
3.19.4 that each party will meet its own costs (to the extent that any are incurred, such as administrative costs or in respect of any advice taken) associated with the entry into of the MoU, unless they agree otherwise in writing; and
3.19.5 that the detail contained within the MoU supersedes any previous discussions that may have taken place between the Parties.
3.20 Once the text of the MoU has been completed (the blanks completed and any project specific information inputted) and the various parties to the MoU have confirmed that they are comfortable with the detail included within the MoU, the document should be signed on behalf of each party.
